Know your “Ratio of Death”
What’s great about Ingramspark is the ability to make books returnable, which some stores absolutely require. I briefly ran a bookstore with the intention of either 1) learning to better understand how they operate and what their needs are, and 2) making some money. There wasn’t the kind of traffic and visibility to make number two happened… But again, a lot of nuanced information for the first. I have other articles about this, but being able to send the book back for a refund makes carrying an unknown author’s books much less risky.
Let’s talk today about a rate of returns which can potentially wipe out all your earnings–and even put you in the hole…
Being less risky to the store does not mean there is no risk! It means that the author is assuming it, instead. It would be nice if we could just believe hard enough that our books to be a success. But belief and marketing are completely different things. Book sales aren’t magic. They come from paying attention to the little things. Even if you do all of those right, you still may get some returns from bookstores who have purchased through your distributor and send them back for whatever reason.
Yesterday I was at an event where I made an author appearance and soul books. Somebody asked me if they liked the first one in my series. They could purchase the next book at the local Barnes & Noble. I told him they could order it, but their real question was whether it would be on the shelf for immediate pickup. This person was asking author-related questions rather than reader ones, so I explained to them how hat it’s my preference to meet people and events for a variety of reasons, including being able to meet people and answer questions like she had. I also mentioned that I make about $10 if she buys the book now in less than a dollar if she buys it from B&N—but they could order it there if she liked (and then handed her a card to order from my website.)
Here’s the thing about being on a bookstore shelf: it’s a massive ego stroke and that feels nice. Seeing their book on a store shelf validates an author at a deep level, especially if it’s face out. But it is not very profitable unless you’re able to sell many thousands of copies that way.
A lot of authors who have not played with tools more advanced than what Amazon offers aren’t familiar with the setup, but a distributor sends books to different stores that they can have on their shelf. The stores act as the sales portal, much like an Amazon sales page, but featuring many, many books. Amazon acts as both a printer with KDP and also is the distributor. The distributor as a middleman, much like the KDP dashboard—it’s the delivery and housing mechanism connecting the sales portal to the product. The store, obviously, connects the product to the customer. If you use certain printers and distributors such as Ingramspark, you can control how much you sell your books for to the bookstore… Stores typically operate on a percentage basis and not on a hard number. It may seem foreign if you’ve only used Amazon because Amazon handles all that the backend and they do not let authors adjust the settings; also, they set them at the absolute worst possible minimums for the distributor’s network. They don’t allow books to be returned and they give only 40%. If you use an Amazon assigned ISBN, the block of numbers they use are easily identified as being sourced through Amazon—that means bookstores, already feeling vastly alienated by Amazon, will always know exactly when an author has done business with the devil.
Ingramspark sounds pretty great, right? You could just set the distribution terms as the best for bookstores and then get the book carried everywhere—sellers will be motivated to push your book above all others! Except that’s not how any of it works. Selling five books a day might be big to you. It’s not all that huge to bookstores, especially the chain resellers.
Still, it’s worth being in the distribution network. I’ve long advocated being Amazon with one of their ISBNs, and mirroring the ISBN with one of your own and published at Ingramspark. Yes, it opens up the opportunities to do book signings at different stores, and it also puts you in a broader distribution network. Side note on those book signings: they will not be as profitable as you think. Whether doing a local signing or requesting a store to stock your book on the shelf regularly, it’s worth asking them they can avoid returning your book. Offer to pay them what they paid for it rather than send it back, saving them work. Because you have committed to the risk, if you get a return, you are on the hook for money… Since your profit on a book is generally $0.27-1.50, and the books have a production cost, plus with shipping rates added in, you will lose money with each return far more than the tiny royalty just referenced. The production cost (which is about 10-20% higher than KDP), and shipping must be reimbursed (again) if you want the book sent to you rather than destroyed.
If it sounds confusing, it kinda is. But if you do one book signing and sell less than 80% of the books, the store manager ordered, you will have returns that cost you money, forcing you to issue a payment to Ingram. Once something hurts you in the wallet, you’ll start moving numbers around and figure out exactly how the entire system works.
I am mainly in distribution so I have the opportunity to work with small mom-and-pop bookstores. I also have a fan base overseas and in places where Amazon is verboten. In order to minimize my risk, I don’t have every one of my books set as returnable, and none are set as returnable in other countries besides the USA (regular postage is bad enough, a return from the UK might force me to sell a kidney.) Also, the only books I allow returns on are books I know I will be able to resell at my event booth. I do frequent live sales shows like comic conventions and other appearances. I rotate through a lot of stock, and adding a couple copies of my more popular titles is an easy enough risk to absorb… Returns on one of those titles simply means I have a couple with different ISBN’s that cost me slightly more money to produce, dragging down my ROI, but in relatively lower numbers.
On to the Ratio!
Recently I ran some numbers and played with the new IngramSpark sales dashboard (which is very pretty, but clumsy to navigate and will hopefully improve) and found a ratio of returns to sales that authors must exceed to have profits selling with returns enabled. If you dip below the margin, you’ll lose money as returns wipe out your income (and potentially create a deficit). If you exceed it the numbers with high sales vs returns, you should scale up your efforts in that sector, so kudos—but I’m talking about the floor and not the ceiling.
I looked at just my large fantasy series (The Esfah Sagas) over a selected period and noticed I sold 12 copies and had 3 returns come back. The 12:3 ratio meant I earned only $4.77 on all those books sold combined. If there had been one more return, I would have owed back another +$5 and be in the red on this series… that means I would have to pay Ingram money for retail stores to take all the royalties for my work (I’ve written elsewhere on how to mitigate this as much as possible by adjusting price controls). The moral is “Know Thy Ratio.” Your ratio may be very similar and needs to be calculated based on book specifics, but most of my books are around 90k words, are not color prints, and are standard novel trim sizes (think 300 page books at 6×9 and retailing around $18).
Author earnings are already small, and selling a dozen books with no return is not a long-term model for success, unless you can scale that dramatically, efficiently, and cheaply ($4.77 total profit divided by 12 is an earned $0.40 per book net.) I’ve found that a better way is selling directly to readers at live events. It’s enabled me to earn a livable wage from my writing and I scaled into it by starting small and then increasing what works for me until I’ve become an author fixture at some of the larger comic conventions in the upper mid-west. I teach people how to do that—even if they’re introverts. But you can also use your own ecommerce page such as shopify, square, payhip, or etsy, plus many others in order to make direct digital and physical sales. Your mileage may vary and success will largely depend on how much effort (read: strategy + action + money) you put into the marketing.
If learning to meet people and sell at live events interests you, I have many tips on that model in my book, Sell More Books at Live Events—and the only books that come back to me there are if the copy is misprinted or damaged (I sold between 3,000-5,000 copies to folks last year and had 3-6 come back and only because of physical defects.)
